Just got a short sale approved today, can i still get 8000 dollar tax credit?

Question

Hi Guys,

As i understand it, you have until june 30th to complete the short sale to get the tax credit.

We put in an offer for a short sale (for personal use, not investment) back in march and it got approved only today.

The contract we submitted had the expiration date of the agreement in april, i think, but we decided to stick with it anyway and now it got accepted today (in june). Will that be a problem? I assume we have to do another contract for the final sale.

The tax credit website says we have until the 30th to complete the sale. "Complete the sale" means transfer of title, right? Or is there more?

The bank that approved the short sale was Bank of America (via the equator system) if that makes a difference. So i don't know if there are any other pitfalls i might have.

Scott Hubbard · Answer

If you are under contract before April 30th and close before June 30th, which means the date of sale and funding, (does not necessarily mean date of recordation) then you will meet the deadline. To be safe, I would schedule closing at least 24 to 48 hours prior to the 30th just in case. Mistakes can happen especially if your borrowing your funds.

Scott Hubbard · Answer

How is a fully executed purchase agreement non-binding? There are three basic parts to a binding contract. Competent Parties - For a contract to be valid, each side must have the capacity to enter into it. Most people and companies have sufficient legal competency. A drugged or mentally-impaired person has impaired capacity and chances are a court may not hold that person to the contract. Consideration - If the other side is to be held to the contract, you must give up something in exchange. This is called consideration. No side can have a free way out or the ability to obtain something of value without providing something in exchange. Money is the most common form of compensation, but it can also be property, giving up a right or valid claim, making a promise to do or not to do something, or anything of value. Agreeing to perform an illegal or illicit act is not consideration and the contract is void. Mutual Assent or Meeting of the Minds - This means that each side must be clear as to the essential details, rights, and obligations of the contract. Putting the deal down on paper prior to signing it goes A LONG way to avoid future misunderstandings and disputes. Meeting of the minds sometimes can be expressed by words spoken or gestures made or can be inferred from the surrounding circumstances. There is no meeting of the minds if: (1) one side is obviously joking or bragging, (2) there is no actual agreement (i.e., the farmer who is selling a gelding and the buyer thinks the horse is a brood mare), or (3) both sides have made a material mistake as to the terms or details of the contract. I understand the confusion because the lender must agree to the price, but regardless, it is binding because it fulfills the above 3 legal requirements. Lastly, I have seen nowhere in the requirements that the short sale must be agreed by the lender prior to April 30th. If there is specific verbiage to this point, please point it out becuase I definetly missed that part.

Steve Babiak · Answer

The bill passed by the Senate, that Matt mentioned, only extends the closing date from June 30, 2010 to Sept 30 2010 - the agreement of sale still has to be in place by April 30, 2010 to get this tax incentive. IMO, my earlier post is the one that states what you have to get past to legitimately collect this $8000 - your agreement of sale must have been valid (or extended) on April 30, 2010.

J Scott · Answer

I have no specific knowledge here about the situation, but based on my understanding of the credit and my understanding of how real estate contracts work, I would agree with Scott. The contract would have been executed prior to submitting the package to the lender for approval, and it sounds like that was done prior to April 30. Assuming you are still working off the agreement signed/dated prior to April 30 and assuming you close prior to June 30, I'd be willing to bet that you will qualify for the credit.

Ted Akers · Answer

Unfortunately, I do not think it will qualify because you had to be under contract by April 30 - and then also close by June 30.

Ted Akers · Answer

You will not be able to rely on that phone call with the IRS agent if you were to get audited. Make sure you get your extension executed.

Ivan Poon · Answer

Maybe i'll just call and ask them to email/write me saying it's ok? Or maybe just record the conversation? Heh, this is so confusing and stressful

Ivan Poon · Answer

Ok, i called the IRS and they said it was fine to get the tax credit. The although the closing date on the original purchase agreement was end of april, she said that since we stuck with the property that it was ok... just treat it as the closing went longer than we had anticipated. What do you guys think, since an IRS agent confirmed it, am i OK?

Ivan Poon · Answer

Oh shoot, i missed all the replies, ok i think i'll ask a professional, thanks

Matt Mathews · Answer

Today-Senate passed an extension bill for tax credit until Sept. 30th-2010. Your deal qualifies.